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UK — SThree gross profit down by -34%

11 September 2009

SThree plc (STHR:LSE), the international specialist staffing business, has today issued an Interim management statement for the three months from 31 May 2009 to 30 August 2009 being the third quarter of the financial year ending 29 November 2009.

During the period the Group continued to experience an overall decline in demand for its services, particularly for permanent placements, with contract hiring proving more resilient across all geographies. Un-adjusted Group gross profit in the period declined by circa 34% year on year to 37.6 million Pounds (2008: 56.9 million Pounds) and by 38% on a constant currency basis. UK gross profit declined 46% and non-UK gross profit declined by 29% on a constant currency basis.

Compared to the same period last year, Contract gross profit declined by 28% and Permanent gross profit declined by 49% on a constant currency basis. A significant decline in volume was somewhat offset by average permanent fees and gross profit per day rates which were moderately ahead on an unadjusted basis but with permanent fees decreasing slightly on a constant currency basis.

Contract now represents 58% of gross profit (2008: 52%, 2009 half year: 58%) and non-UK represents 55% of gross profit (2008: 46%, 2009 half year: 54%).

At 30 August 2009 SThree had 4,190 contract runners, down 29.1% year on year. Since the half year, the Group's contract runners have decreased by 6.8%, an element of which is attributable to seasonal factors. Average contractor gross profit per day rates were flat on a constant currency basis compared with both half year 2009 and the prior year. During the period, SThree made a total of 1,395 permanent placements, a reduction of 45.3% over the previous year (2008: 2,552). Average permanent placement fees were down by circa 3% year on year on a constant currency basis.

At 30 August 2009 UK contract runners were down 36.0% versus the equivalent period in 2008. However the UK gross profit per day rate was down only slightly versus the previous year. During the period, UK permanent placements were down 60.5%, reflecting a 70.4% reduction in UK ICT placements and a 36.0% reduction in UK non-ICT placements. Average UK permanent placement fees were down 7.6% versus last year.

The non-UK business slowed further in the period. Contract runners reduced versus last year by 15.1%, with a modest decline in gross profit per day rates on a constant currency basis. During the period, permanent placements declined by 27.8% with a modest decline in average fees.

The Group's cash position remained strong with net cash of circa £40m at 30 August 2009. SThree has no debt and does not currently utilise its existing facilities. The Group is close to signing a new financing facility, which the Board expects to be concluded by the end of October 2009.

Total Group headcount at 30 August 2009 of 1,506 was down 34.1% versus last year (2008: 2,287). Since the half year 2009, Group headcount is down 8.6%, with UK headcount being down by circa 11% and non UK headcount down by circa 5%. The third quarter reduction was a consequence of natural attrition and the Group believes that headcount remains at an appropriate overall level in the light of the current market conditions and opportunities. However, the Group has begun to hire selectively for those markets where there is clear evidence that client demand will support increased headcount.

Russell Clements, CEO, commented, "the third quarter of 2009 saw the continuation of challenging trading conditions and we are certainly not yet in a position to call a turning point in the market, particularly given that our Non-UK business continued to slow during the period. However, there are some signs of stability in our UK business when we look at our more recent month on month performance rather than the more challenging year on year comparatives."

"Although we remain committed to ensuring that we remain fit for purpose in the short term, we also continue to manage our business with an eye to the inevitable recovery, whenever that materialises. Our strong cash position gives us the capacity to make prudent investments for the future and our flexible business model allows for a rapid re-scaling of the Group as soon as market conditions allow."

In early trading SThree's shares were down 0.52% to 2.68 Pounds.

 

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